Housing crunch quickens pace of home development. (Who's Who in Real Estate: The Ins and Outs of L.A. Homebuilders).

WASHINGTON Mutual Inc., now considering throwing in the towel on the decade-long effort to develop the 2,800-acre Ahmanson Ranch, could be viewed as another developer caught up in the Southern California anti-development meat grinder.

But a more accurate picture of what's happening can be seen a few miles west, where on a 40-acre site near Kanan Road and Canwood Street in Agoura Hills, J.H. Snyder Co. is framing 336 townhouse-style apartments in 20 buildings at its Oak Creek development.

The developer and the city worked out a plan to preserve the site's two hills and 93 of the 100 oak trees on the site.

"The city was cooperative, but is very protective of its hills, trees and stream beds," said Jerry Snyder, managing partner of the L.A.-based firm. "I wouldn't call (the layout) a concession -- it was just good design."

So goes the give and take between developers looking to capitalize on a vibrant residential market and cities trying to put a dent in the regional housing shortage while increasing their tax base.

New housing development has in recent decades run into a dual roadblock: resistance from residents eager to maintain existing quality of life and local governments that view residential development as more trouble than it's worth in tax revenues.

But with a housing shortage in Los Angeles growing more acute and property values continuing to climb, residential projects have gained favor in recent years and the relationship between developers and many city governments has grown less adversarial.

The result has been a surge in new housing units. Permits for more than 19,000 units were issued in Los Angeles County last year, nearly twice the 1997 figure. More than 5,000 units were permitted for the first quarter of 2003, up 50 percent from the like period a year earlier, according to the Construction Industry Research Board.

More tellingly, permits for multi-family units last year topped 11,000, more than three times the 1997 figure. First quarter permits are up 76 percent from a year ago.

Residents drive commerce

"More cities are recognizing there's a shortage of housing and, without (residential) rooftops, the retail projects they've invested in are worthless," said Larry Kosmont, president of Kosmont Cos., an economic consulting firm. "Only recently did the cities realize that if they don't house their workers, they don't have a balanced economic development plan."

The numbers reflect a more pro-growth stance by infill communities and outlying cities alike. Most of the single-family home production has been in the northern part of the county, where communities in the Antelope and Santa Clarita valleys continue to be supportive of new projects on undeveloped land.

Even cities that were less-than-hospitable in the past to development are providing either financial incentives or shortening the entitlement process.

The most notable example is the adaptive reuse ordinance enacted by the city of Los Angeles in 1999. More than 4,000 residential units have either been completed or are under construction in downtown alone as a result of the ordinance -- and as many as 200 are in the works in Hollywood.

The ordinance streamlined the approval process for converting commercial buildings to residential uses through a zoning overlay covering parts of downtown and Hollywood. It also reduced the set-back and parking requirements that apply to new residential developments throughout the rest of the city.

Through the Community Redevelopment Agency, the city has also backed several adaptive reuse developers like Gilmore Associates, Lee Group and CIM Group Inc. The latter received CRA funding to purchase the 7.2-acre site for its $247 million South Village project downtown that broke ground in last month.

Even downtown developers not receiving CRA funds benefit from the ordinance.

"I bet you we saved a year and a half not having to go through the planning process," said Gregory Schem, president of Kor Realty Group, which just finished the 322-apartment Pegasus development in the old General Petroleum Building at 6th and Flower streets. Kor, which did receive a federal tax credit for renovating the 54-year-old historic structure, took a little more than a year to get city approvals for Pegasus.

More conservative communities like Beverly Hills and Pasadena are making concessions for residential developers as well.

Pasadena amended its general plan to allow mixed-use projects along Lake Avenue, green-lighting Champion Development Co.'s 72apartment project that will also include office and retail. And Beverly Hills created an overlay zone to accommodate Snyder's $50 million mixed-use development at Wilshire Boulevard and Crescent Drive, which will include 88 apartments as well as 40,000 square feet of offices when completed in late 2004.

Era of accommodation

For their part, developers have been more willing to embrace residential alternatives when they run up against resistance to office projects, simply because the market for housing is so hot.

The median price for a Los Angeles County home last month was more than $332,000, a nearly 20 percent increase from May 2002, according to the California Association of Realtors. Meanwhile, the average L.A. County apartment rent for the first quarter was $1,300, a 6 percent jump from the year-earlier quarter, according to RealFacts.

So when Champion met resistance to its proposed a 150,000-square-foot office building at the Pasadena site, shifting to apartments wasn't seen as a losing proposition.

Likewise, Snyder's original project had about 125,000 square feet of offices and a supermarket, with no residential component.

"The neighbors originally didn't want the market because of the traffic," said Snyder, whose company is breaking ground on the 436-unit first phase of the NoHo Commons mixed-use project in the fall. "When I came back with a small office building, it went from 6,000 car trips a day to 1,000."

Impediments remain

Which is not to say developers are avoiding all roadblocks. Quality of life is a constant, and neighborhood groups can still muster enough opposition to stall a new project. So can environmentalists when a project is proposed for an ecologically sensitive area.

"It's very easy for anybody to slow the development process down and spend a lot more money," said Schem, who said Kor took more than three years to get entitlements for its Hancock Park apartment project. "It's pretty much the same as it has been, and has the potential to get worse with the instituting of neighborhood councils."

In addition to Ahmanson Ranch, where L.A. County is suing Ventura County over its approval in 2002 of the project's development plan, Playa Vista's residential component has been reduced to about 5,800 from 13,000. Meanwhile, a proposed 572-home development in the Verdugo Hills above Glendale has been tied up in courts since 1992.

"It's pretty frustrating to watch the region grow in a way that doesn't address regional needs for open space and transportation," said Bill Corcoran, Southern California regional representative for the Sierra Club, which has been an opponent to the Ahmanson Ranch development. "The adaptive reuse ordinance and the mixed-use projects are signs of progress, but we need to be more aggressive and creative about allowing the conversion of urban infill areas."

But despite some environmental and neighborhood concerns, most new residential projects are being approved with little contention.

"When you drive around and see small apartment and housing communities going up, chances are that they were done by right," said Mitch Menzer, president of the city planning commission. "I would guess that 90 percent of the projects are done with no controversy."

That bodes well for a market where demand shows no sign of abating.

The California Building Industry Association is projecting that housing permits issued this year will be more than 10 percent greater than in 2002. And while it sees the pace declining in 2004, the projections only call for a falloff in multi-family applications. Single-family home permits are projected to grow by nearly 5 percent in 2004.

Despite that activity and increasing cooperation between developers and municipalities, supply will continue to fall short of demand.

While 180,000 residential units will begin construction this year statewide -- up from almost 168,000 last year -- 220,000 housing starts would be needed to keep up with California's population increase, according to the CIRB.

"Cities are now starting to use redevelopment agencies to produce affordable housing units," said Kosmont. "But it's not making a dent."

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